“Trade what you see; not what you think.” – The Old Fool,
Richard McCranie, trader extraordinaire.
FOMC RATE DECISION (Reuters)
“The Federal Reserve on Wednesday signaled it is likely
to raise U.S. interest rates in March and reaffirmed plans to end its bond
purchases that month as well before launching what was characterized as a
significant reduction in its asset holdings. The combined moves will complete
the Fed's pivot away from the loose monetary policy that has defined the
coronavirus pandemic era and toward a more urgent fight against inflation.”
Story at...
My cmt: Markets were ok at the release of the news, but
fell hard during Chairman Powell’s press conference. Apparently, the market
didn’t like the language that was perhaps more hawkish than expected. He said, “Inflation risks are still to the
upside in the views of most FOMC participants, and certainly in my view as
well. There’s a risk that the high inflation we are seeing will be prolonged.
There’s a risk that it will move even higher. So, we don’t think that’s the
base case, but, you asked what the risks are, and we have to be in a position
with our monetary policy to address all of the plausible outcomes.”
NEW HOME SALES (TribLive/AP News)
“Sales of new single family homes in December rose to
their highest level in 10 months as buyers took advantage of lower prices in
anticipation of higher interest rates. The increase put the seasonally adjusted
annual sales pace to 811,000 for the month, according to the Commerce
Department, an 11.9% increase over November’s figure...” Story at...
https://triblive.com/news/world/us-new-home-sales-jump-in-december-as-prices-fall/
EIA CRUDE INVENTORIES (EIA)
“U.S. commercial crude oil inventories (excluding those
in the Strategic Petroleum Reserve) increased by 2.4 million barrels from the
previous week. At 416.2 million barrels, U.S. crude oil inventories are about
8% below the five-year average for this time of year.” Report at...
https://ir.eia.gov/wpsr/wpsrsummary.pdf
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website as
of 5:00 PM ET Wednesday. U.S. total case numbers are on the left axis; daily
numbers are on the right side of the graph in Red with the 10-dMA of daily
numbers in Green. I added the smoothed 10-dMA of new cases (in purple) to the
chart.
If we focus on the box in the above chart we can see (below)
that the 10-dMA of new-cases and the smoothed 10-day has peaked.
MARKET REPORT / ANALYSIS
-Wednesday the S&P 500 fell
about 0.2% to 4349.
-VIX rose about 3% to 31.96.
-The yield on the 10-year Treasury rose to 1.869%.
I hope my blog isn’t too confusing at market turns. Tuesday, we had the Long-Term Ensemble still
giving a SELL sign while I suggested that the markets may have bottomed and were
giving a buy-signal. My buy-calls are based on market internals and market
action. The Long-Term Indicator Ensemble
is good for sell-signals, but it can be very slow to give buy-signals after a
bottom.
I wrote yesterday that I decided to buy Tuesday and
increase my stock holdings to about 45% of the total portfolio. “I’ll decide
whether to buy more depending on market action going forward.” Needless to say,
I didn’t buy more Wednesday. The market action was not good during and after
the Fed press conference.
Pullback Data
Days since top: 16 (Avg= 30 days for corrections <10%;
60 days for larger, non-crash pullbacks)
Drop from Top: 9.3%; 12% intraday (Avg.= 13% for
non-crash pullbacks)
The S&P 500 is 1.9% below its 200-dMA.
The daily sum of 20 Indicators declined from -3 to -8
today (a positive number is bullish; negatives are bearish); the 10-day
smoothed sum that smooths the daily fluctuations declined from -51 to -55 (The
trend direction is more important than the actual number for the 10-day value.)
These numbers sometimes change after I post the blog based on data that comes
in late. Most of these indicators are short-term so they tend to bounce around
a lot.
The Long Term NTSM indicator
ensemble remained SELL. Volume, VIX & Price are bearish; Sentiment is
Neutral. The important sell-signal was 12 Jan. Today is just a reminder that
conditions remain bearish.
I may have started buying too soon. Volume increased and
that is bearish and Sentiment may be sending a clue that I should have
considered.
I measure Sentiment as %-Bulls (Bulls/{bulls+bears})
based on the amounts invested in selected Rydex/Guggenheim mutual funds.
Surprisingly, sentiment is more bullish now, 94%-bulls on a 5-day basis, than
it was when the S&P 500 topped out 3 weeks ago. Then it was 92%-bulls. I
keep hearing that Investors surveys have gotten bearish. Sure, they have; but rather than ask people
whether they are bearish, I’d rather see how they are invested. The answer is
they are still way too bullish (at least in Guggenheim funds). This may have to
change before we see a bottom.
There were a few positive signs today. Technology was up,
buoyed by strong earnings from Microsoft yesterday and Intel today. A similarly
bullish report from Apple on Thursday could end the pullback. The markets are
still way overbought. RSI was 15 (30 is
overbought) and there have only been 6 up-days in the last month.
Still, it’s hard to be bullish after today’s action. I will wait and see what happens tomorrow.
MOMENTUM ANALYSIS:
TODAY’S RANKING OF 15 ETFs
(Ranked Daily)
The top ranked ETF receives
100%. The rest are then ranked based on their momentum relative to the leading
ETF.
*For additional background on
the ETF ranking system see NTSM Page at…
http://navigatethestockmarket.blogspot.com/p/exchange-traded-funds-etf-ranking.html
TODAY’S RANKING OF THE DOW 30
STOCKS (Ranked Daily)
Here’s the revised DOW 30 and
its momentum analysis. The top ranked stock receives 100%. The rest are then
ranked based on their momentum relative to the leading stock.
For more details, see NTSM
Page at…
https://navigatethestockmarket.blogspot.com/p/a-system-for-trading-dow-30-stocks-my_8.html
WEDESDAY MARKET INTERNALS
(NYSE DATA)
Market Internals remained SELL.
Market Internals are a decent
trend-following analysis of current market action, but should not be used alone
for short term trading. They are usually right, but they are often late. They are most useful when they diverge from
the Index.
Tuesday, I increased my
stock-allocation in the portfolio to about 45% invested in stocks. This is
close to my “normal” fully invested stock-allocation of 50%. I trade about
15-20% of the total portfolio using the momentum-based analysis I provide here.
If I can see a definitive bottom, I’ll add a lot more stocks to the portfolio
using an S&P 500 ETF.
You may wish to have a higher
or lower % invested in stocks depending on your risk tolerance. 50% is a
conservative position that I consider fully invested for most retirees.
As a general rule, some
suggest that the % of portfolio invested in the stock market should be one’s
age subtracted from 100. So, a
30-year-old person would have 70% of the portfolio in stocks, stock mutual
funds and/or stock ETFs. That’s ok, but
for older investors, I usually don’t recommend keeping less than 50% invested
in stocks (as a fully invested position) since most people need some growth in
the portfolio to keep up with inflation.
